Delhi ITAT Upholds LTCG Exemption on Penny Stock Sale: Revenue's Failure to Rebut Documentary Evidence Proves Fatal
Case Overview
Case Name: ACIT Vs Tushar Gupta (ITAT Delhi)
Assessment Year: 2013-14
Appeal Numbers: ITA No. 1918/Del/2026 & C.O. No. 180/Del/2026
Order Date: 31.07.2026
The Delhi Bench of the Income Tax Appellate Tribunal delivered a significant ruling in the matter of ACIT Vs Tushar Gupta, dismissing the Revenue's appeal and affirming the deletion of an addition of ₹70,61,302/- made under Section 68 of the Income Tax Act, 1961. The case revolved around alleged accommodation entries connected to the sale of shares and the assessee's claim for exemption on Long-Term Capital Gains (LTCG) under Section 10(38).
Background and Factual Matrix
Original Return and Reassessment Proceedings
The assessee filed his return of income for Assessment Year 2013-14 on 24.07.2013, declaring a total income of ₹8,95,930/-. The return included exempt dividend income of ₹6,131/- and share profit from a partnership firm amounting to ₹1,57,922/-. No LTCG was disclosed in the original return.
Acting on intelligence gathered by the Investigation Wing pertaining to alleged accommodation entries, the Assessing Officer initiated reassessment proceedings and issued a notice under Section 148. In the return filed in response to this notice, the assessee disclosed LTCG of ₹70,61,302/- as exempt income under Section 10(38).
Share Transaction Details
The core transaction involved the following sequence of events:
| Particulars | Details |
|---|---|
| Date of Purchase | 26.06.2010 |
| Name of Company | M/s Seaview Suppliers Pvt. Ltd. |
| Shares Purchased | 600 shares @ ₹484/- per share |
| Total Purchase Consideration | ₹2,90,400/- |
| Date of Cheque Payment | 26.04.2011 |
| Amalgamation Order | 15.11.2011 (Hon'ble Calcutta High Court) |
| Post-Amalgamation Shares in Access Global Ltd. | 28,200 shares (ratio: 47:1) |
| Date of Credit to Demat Account | 03.03.2012 |
| Dates of Sale | 17.12.2012, 19.12.2012, 24.12.2012 & 27.12.2012 |
| Total Sale Proceeds | ₹73,51,682/- (credited to ICICI Bank account via broker M/s Prakash Nahata & Co.) |
The shares of M/s Seaview Suppliers Pvt. Ltd. were acquired from M/s Kalimata Tradecom Pvt. Ltd., a Kolkata-based stock broking entity. Pursuant to a court-sanctioned amalgamation, M/s Seaview Suppliers Pvt. Ltd. merged with M/s Access Global Ltd. — a listed company — along with two other entities. As a consequence of the amalgamation, each share of M/s Seaview Suppliers Pvt. Ltd. was converted into 47 shares of M/s Access Global Ltd., resulting in the allotment of 28,200 shares to the assessee.
Assessment Order and Addition Under Section 68
AO's Stand
The Assessing Officer harboured doubts about the genuineness of the transactions, placing heavy reliance on the Investigation Wing's report originating from Kolkata. After evaluating the assessee's response to the show cause notice, the AO proceeded to treat the entire sale proceeds of ₹70,61,302/- as unexplained cash credits under Section 68 of the Income Tax Act, 1961. The reassessment order was passed on 30.03.2022 under Section 147 read with Section 144B.
The AO's key contentions included: